Thursday, December 21, 2006

End of Poverty in Developing Countries

In Time magazine's cover story last March entitled "The End of Poverty,'' Professor Jeffrey Sachs of Columbia University in New York describes eloquently his vision of how to eradicate poverty, hunger and disease.

Sachs, a key adviser to the United Nations and the World Bank, suggests that the use of appropriate technologies and efforts to boost agriculture and investments in education, health care and electricity could dramatically reduce poverty in a short time.

The thrust of his argument is that with more money, poverty can be alleviated. The international donor community, urges Sachs, should invest in rural areas of poor nations. Farmers in those countries must get a helping hand to improve their crop output, and medical facilities must be stocked with vaccines and antibiotics to fight epidemics, he says. The costs of action for donors are a tiny fraction of the costs of inaction, Sachs says, and these tasks must be carried out even in the face of global inertia, war, prejudice and skepticism around the world about money wasted in the past.

No doubt these are very worthwhile goals. Unfortunately, Sachs's prescription doesn't deal with the central problem. The important questions are, who will get the job done, and how?
Sachs argues that poor governance isn't a major reason for poverty. The presumption is that with more money, corrupt and inefficient governments and bureaucratic institutions will somehow deliver the goods.

Maybe he should be reminded of what the late prime minister of India, Rajiv Gandhi, once admitted: Less than 15 cents of every dollar in assistance to the poor finally gets to the intended beneficiaries.

Sure, more money would help. Yet with population increasing in developing countries at an annual rate of more than 2 percent, much of the additional funds that might become available will barely meet the increasing need.

With over two-thirds of the world's population living in villages, rural poverty is of paramount concern. Many of the rural poor are from socially deprived communities; they are illiterate and untrained. Without sufficient skills, social status and economic power, most of the poor are unable to do any business on their own, even with financial assistance.

It is farming that can give the rural poor an opportunity to better their lives. Farming is what villagers have a natural affinity for, and it is an industry where large numbers of people can be employed. The goal should be to help them acquire land that can be developed and irrigated, grow high-value crops, and sell their produce in a competitive market.

With financial incentives such as low-interest loans and tax breaks, private companies can be motivated to build factories in rural areas, especially for food processing and packaging, thereby assuring a steady demand for the produce as well as generating additional employment. Rural areas are ideally suited for other industries, such as herbal products, cement and tile, lumber and pulp, meat, dairy and poultry. These businesses offer job opportunities for those in villages who would otherwise migrate to cities for employment.

There is no shortage of ideas to solve poverty. What is lacking is good planning and execution. Poor governance has blocked honest efforts to improve the lives of the poor. Corruption, political influence on credit, land allocations and other related decisions, diffused focus and priority, poor execution, shortage of rural infrastructure, social inequality and a host of other factors are impediments to a successful outcome.

My own experience of working in the villages of Tamil Nadu and Karnataka states in India for the last 10 years has made me conscious of the obstacles to change. The issue isn't simply one of badly executed government projects; participating with government on projects is no easy task. After many years of trying to get officials to fix a seven- kilometer (4.3-mile) stretch of public road leading to our projects that had become unnavigable, our foundation (visit www.tgfworld.org) recently decided to contribute 25 percent of the cost of improving it if the government would come up with the balance.

Though there was an explicit understanding with the government that we would manage the project, the process of dispersing the money allowed the officials to insist that funds be set aside for government "supervision.'' The result was that, even with our objections, nearly a third of the overall budgeted expenditure for construction was used in bribes.

Nevertheless, we were comforted by knowing that usually at least a half of construction funds are wasted in illegal payments. We were able to build a superior road that has now lasted more than three years without any serious deterioration.

In most developing countries, poverty-eradication programs are government funded and managed initiatives. International organizations, such as the World Bank and the UN, channel practically all their aid through governments. Non-governmental organizations rely on government and donor funding, and hence, they must remain within set developmental models prescribed to them.

The private sector, on the other hand, hasn't yet found it financially attractive to be directly involved in such efforts, except for selling their products and services through the government. The outcome of this approach has been far from adequate. How do we then solve the problem? There is no simple answer.

To start with, there must be a genuine recognition that many of the present development models that have been in place for several decades won't produce the required results. New and innovative approaches must be tried.

Part of the answer may lie in the unchallenged assumption about government's rightful role in poverty eradication. As long as governments control the flow of developmental funds and manage projects, it won't be possible to achieve the desired outcome.

The time has come to test a new model wherein the government's role is that of being a catalyst for change, instead of being the manager or implementer of change. There should be less room for bribes and more incentives for private participation in developmental projects that directly impact the poor. Only those who assume risks are likely to perform well.

The solution doesn't lie in more money spent by governments at will. Those who still believe that government is the only effective agent to care for the poor are urged to spend real time with those outside the government working for the poor. Only with a fundamental change in approach can we begin to expect an end to poverty, as Sachs would like us to believe is possible.
Until the world embraces a new model to tackle poverty, today's corrupt governments and inefficient bureaucracies offer no real hope.

Visit our web site www.indiauntouched.com and www.tgfworld.org

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